• Buy Entry – 11.28 Target – 14.41 Stop Loss – 9.76
  • Xtep International Holdings Limited engages in the design, development, manufacture, sale, and marketing and brand management of sports footwear, apparel, and accessories. The company sells its products primarily under the XTEP brand, as well as Palladium, K-Swiss, Saucony, and Merrell brand names. It is also involved in the trading of sportswear products.
  • Strong 1H21 financials. Xtep’s revenue rose 12% YoY to RMB 4.1bn in 1H21 and net profit grew by 72% YoY to RMB 427mn. Management also announced a very robust target of RMB 20 bn/RMB 4bn Xtep sales/new brands sales by FY25E, implying a 23%/30% sales CAGR during FY20-25E. Growth drivers include further expansion into T1 & T2 cities, aided by the launch of XDNA (a high-end product series that will start to have new stores in 2H21) and accelerated growth from lifestyle products.
  • Catalyst: Winter olympics. The 2022 Winter Olympics, an upcoming international winter multi-sport event, is scheduled to take place from 4 to 20 February 2022 in Beijing and towns in the neighbouring Hebei province in the People’s Republic of China. Historically, prior to the international event, share prices of companies involved in sporting goods enjoyed a price rally. The chart below shows the price rally of Xtep, which began in early-mid December 2017 just before the PyeongChang 2018 Olympic Winter Games held between 9 and 25 February 2018.
  • Positive consensus estimates. According to Bloomberg consensus estimates, Xtep has ratings of 26 BUYS, 0 HOLD and 2 SELL, with a 12M target price of HK$14.85, representing an upside of 21.9% as of yesterday’s closing price.
  • Technical analysis. 20dMA has crossed the 60dMA and we recommend to long at the 20dMA, which is also around the previous resistance level. Shares are strongly supported at the 200dMA and RSI is on a gradual uptrend.